CFTC CHARGES NEVADA-BASED COMPANY WITH MAKING ILLEGAL OFF-EXCHANGE PRECIOUS METALS TRANSACTIONS

FROM:  U.S. COMMODITY FUTURES TRADING COMMISSION 

April 27, 2015

CFTC Charges Nevada-Based My Global Leverage, LLC and Toney Blondo Eggleston with Engaging in Illegal, Off-Exchange Precious Metals Transactions with Retail Customers

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) announced the filing of a civil injunctive enforcement action in the U.S. District Court for the District of Nevada against Defendants My Global Leverage, LLC (MGL) and its owner and managing member Toney Blondo Eggleston, who resides in Newport Coast, California. The CFTC Complaint charges the Defendants with engaging in illegal, off-exchange transactions in precious metals with retail customers on a leveraged, margined, or financed basis. The Complaint further alleges that Eggleston, as controlling person for MGL, is liable for MGL’s violations of the Commodity Exchange Act (CEA).

According to the Complaint, since at least July 16, 2011 and continuing through at least November 2012, MGL, by and through its employees including Eggleston, solicited retail customers by telephone to engage in leveraged, margined, or financed precious metals transactions. During that period, approximately 12 of MGL’s customers paid approximately $786,000 to MGL in connection with precious metals transactions, and MGL received commissions and fees totaling approximately $257,680 in connection with these precious metals transactions, according to the Complaint.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, leveraged, margined, or financed transactions such as those conducted by MGL, are illegal off-exchange transactions unless they result in actual delivery of metal within 28 days. The Complaint alleges that metals were never actually delivered in connection with the leveraged, margined, or financed precious metals transactions made on behalf of MGL’s customers.

The Complaint further alleges that MGL executed the illegal precious metals transactions through Hunter Wise, LLC (Hunter Wise). The CFTC filed an enforcement action against Hunter Wise, among others, in December 2012, charging the defendants with engaging in illegal, off-exchange precious metals transactions, and charging Hunter Wise with fraud and other violations (see CFTC Press Releases 6447-12 and 6655-13).

On February 19, 2014, the court found that Hunter Wise had no actual metal to deliver to customers and held that Hunter Wise engaged in illegal precious metals transactions and was required to register as a Futures Commission Merchant but did not do so and therefore violated Sections 4(a) and 4d of the CEA (see CFTC v. Hunter Wise Commodities, LLC, et al., 12-81311 (Order on the Parties’ Motions for Summary Judgment)). On April 15, 2014, the U.S. Court of Appeals for the Eleventh Circuit affirmed the court’s issuance of a preliminary injunction and held that the CFTC’s jurisdiction under Section 2(c)(2)(D) of the CEA extends to the precious metals transactions at issue in the case and that no exception to the CFTC’s jurisdiction applied. And, on May 16, 2014, after a bench trial on the remaining claims, including fraud, the District Court entered an Order finding that Hunter Wise fraudulently misrepresented the nature of precious metals transactions that resulted in millions of dollars in customer losses (see CFTC Press Release 6935-14).

In its continuing litigation against MGL and Eggleston, the CFTC seeks disgorgement of ill-gotten gains, civil monetary penalties, permanent registration and trading bans, and a permanent injunction from future violations of the CEA, as charged.

CFTC Division of Enforcement staff members responsible for this action are Glenn Chernigoff, Michelle Bougas, Alison B. Wilson, and Rick Glaser.

CFTC CHARGED HUSBAND, WIFE AND COMPANIES WITH FRAUD

FROM:  U.S. COMMODITY FUTURES TRADING COMMISSION 

February 3, 2015

CFTC Charges California Residents Christopher Valois and Cynthia Wong and Their Companies with Fraud and Registration Violations

Husband and wife team allegedly stole more than $300,000 of the $750,000 their customers invested

Federal court enters emergency Order freezing Defendants’ assets and protecting books and records

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that Judge Cormac J. Carney of the U.S. District Court for the Central District of California entered an emergency restraining Order freezing assets and prohibiting the destruction or concealment of books and records of Defendants Christopher Valois, Cynthia Wong, and their companies, Bertram Trade LLC (Bertram) and Churchhill Commodities Trading LLC (Churchhill), all of Orange County California. The judge set a hearing date for February 12, 2015.

The court’s Order arises from a CFTC Complaint filed on January 28, 2015, charging the Defendants with precious metals and futures fraud, misappropriation, engaging in illegal off-exchange precious metals transactions, and registration violations, in violation of the Commodity Exchange Act and CFTC Regulations from October 2011 to the present.

According to the Complaint, husband and wife Valois and Wong, acting by and through Bertram and Churchhill, fraudulently solicited approximately $450,000 from six customers, some of whom were senior citizens, to purchase precious metals or engage in futures trading. The Complaint states that the precious metals transactions offered by Valois and Wong and their companies were illegal off-exchange instruments and alleges that Valois and Wong misappropriated more than $300,000 of customer money to pay their personal expenses.

The Complaint also alleges that Valois and Wong acted as Commodity Trading Advisors by trading another $300,000 of at least four members of the general public in futures contracts and receiving advisory fees for such futures trading, even though they were not registered with the CFTC, as required. In fact, Valois previously had been banned from the futures industry for cheating and defrauding customers, according to the Complaint.

In its continuing litigation, the CFTC seeks restitution, disgorgement of ill-gotten gains, civil monetary penalties, trading and registration bans, and a permanent injunction against further violations of federal commodities laws, as charged.

The CFTC appreciates the cooperation of the National Futures Association in this matter.

CFTC Division of Enforcement staff members responsible for this case are Camille Arnold, Joseph Patrick, Robert Howell, Scott Williamson, and Rosemary Hollinger.

DEFENDANTS ACCUSED OF DEFRAUDING CUSTOMERS OF OVER $2.3 MILLION IN OFF-EXCHANGE PRECIOUS METALS CASE

FROM:  COMMODITY FUTURES TRADING COMMISSION 

January 21, 2015

Federal Court Orders California-Based Defendants Bharat Adatia and His Companies, Lions Wealth Holdings, Lions Wealth Services, and 20/20 Precious Metals to Pay over $5.3 Million in Monetary Sanctions for Multi-Million Dollar Fraudulent Precious Metals Scheme

Defendants Defrauded Customers of More than $2.3 Million in Connection with Illegal Off-Exchange Precious Metals Transactions

Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) today announced that on January 16, 2015, Judge Josephine L. Staton of the U.S. District Court for the Central District of California entered a Consent Order for permanent injunction against Defendants Lions Wealth Holdings, Inc. and Lions Wealth Services, Inc. (collectively Lions Wealth), 20/20 Precious Metals, Inc. (20/20 Metals), and their principal Bharat Adatia (aka Brad Adatia) for fraudulently soliciting retail customers and prospective customers to enter into off-exchange trading of precious metals on a leveraged, margined or financed basis. Adatia resides in San Juan Capistrano, California. The Defendants were also charged in the CFTC Complaint with falsely representing that customers were purchasing actual physical metal and issuing false account statements, among other illegal conduct (see CFTC Press Release and Complaint 6729-13, September 30, 2013).

The court’s Consent Order requires Lions Wealth and Adatia jointly to pay restitution of $1,773,013, and 20/20 Metals and Adatia jointly to pay restitution of $543,227 (resulting in a combined restitution sum of $2,316,240) and requires the Defendants to pay a civil monetary penalty totaling $3,072,490. The Order also imposes permanent trading, solicitation, and registration bans against the Defendants and prohibits them from violating the Commodity Exchange Act and a CFTC Regulation, as charged.

According to the CFTC’s Complaint, the Defendants falsely claimed to sell physical metals (including gold, silver, platinum, and palladium); make loans to customers to purchase physical metals; and arrange for the storage and transfer of customers’ physical metals to an independent depository. The Complaint further charged that the Defendants did not sell or transfer ownership of any physical metals or disburse funds as loans and that, in fact, no metals were stored in any depositories for or on behalf of Lions Wealth and 20/20 Metals customers. Rather, the Defendants used a portion of the funds received from retail customers to enter into paper transactions with a third-party, Hunter Wise Commodities, LLC (Hunter Wise) (see CFTC Press Releases 6447-12, December 5, 2012 and 6935-14, May 22, 2014).

Specifically, the Order finds that between July 16, 2011 and February 22, 2013, the Defendants falsely claimed to sell physical metals. During that time, at least 44 Lions Wealth retail customers collectively incurred at least $1,807,712 in trading losses, commissions, interest charges, and other fees. The Order further finds that at least 30 20/20 Metals retail customers collectively incurred at least $570,266 in trading losses, commissions, interest charges, and other fees. The Defendants knew or recklessly disregarded that there was no metal underlying the retail commodity transactions, according the Order.

The Order provides that Melanie Damian, Esq. is responsible for collecting restitution and making any distributions to Lions Wealth and 20/20 Metals customers. Ms. Damian was appointed by the U.S. District Court for the Southern District of Florida as Special Monitor, Corporate Manager, and Equity Receiver in the CFTC’s enforcement action against Hunter Wise and certain of its associated entities.

The CFTC cautions victims that restitution orders may not result in the recovery of money lost because the wrongdoers may not have sufficient funds or assets. The CFTC will continue to fight vigorously for the protection of customers and to ensure the wrongdoers are held accountable.

The CFTC Division of Enforcement staff members responsible for this action are Elizabeth N. Pendleton, Melissa Glasbrenner, Joseph Konizeski, William P. Janulis, Scott Williamson and Rosemary Hollinger.

COURT ORDERS MAN AND COMPANY TO PAY $2.5 MILLION FOR ILLEGAL, OFF-EXCHANGE PRECIOUS METALS TRANSACTIONS

FROM:  U.S. COMMODITY FUTURES TRADING COMMISSION 

Federal Court Orders Florida Resident Richard Morello and His Florida Company, Vertical Integration Group LLC, to Pay over $2.5 Million in Monetary Sanctions for Engaging in Illegal, Off-Exchange Precious Metals Transactions

Junior Alexis, Florida Resident and Vertical Integration Group, LLC Employee, ordered to pay over $700,000 in monetary sanctions for his role in the unlawful venture

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that Judge Beth Bloom of the U.S. District Court for the Southern District of Florida entered an Order of Default Judgment against Vertical Integration Group LLC (Vertical) of Lake Worth, Florida, and its Managing Members, Richard V. Morello of Lake Worth, Florida, and Junior Alexis of Boynton Beach, Florida, for engaging in illegal, off-exchange precious metals transactions.

The Order, entered on September 29, 2014, requires Vertical and Morello, jointly and severally, to pay restitution of $893,859 and Alexis, jointly and severally with Morello and Vertical, to pay restitution of $563,131; requires Vertical and Morello, jointly and severally, to pay a civil monetary penalty of $1,663,698, and Alexis to pay a civil monetary penalty of $140,000; imposes permanent trading, solicitation, and registration bans against all of the Defendants; and prohibits them from engaging in illegal, off-exchange retail commodity transactions, as charged.

The Court’s Order stems from a CFTC Complaint filed on January 13, 2014, that charged the Defendants with engaging in illegal, off-exchange transactions in precious metals with retail customers on a leveraged, margined, or financed basis (see CFTC Press Release and Complaint 6824-14). The Complaint further charged and the Order found that Morello, as controlling person for Vertical, is liable for Vertical’s violations of the Commodity Exchange Act.

The Order provides that Melanie Damian, Esq. is responsible for collecting restitution and making any distributions to Vertical’s customers. Ms. Damian was appointed by the U.S. District Court for the Southern District of Florida as Special Monitor, Corporate Manager, and Equity Receiver in the CFTC’s enforcement action against, among others, Hunter Wise Commodities LLC (Hunter Wise) and certain of its associated entities (see CFTC Press Releases 6447-12, December 12, 2012 and 6935-14, May 22, 2014).

The Order further finds that, since at least July 16, 2011 and continuing through at least February 2013, Vertical, by and through its employees, including Morello and Alexis, solicited retail customers to engage in off-exchange leveraged, margined, or financed precious metals (including gold, silver, platinum and palladium) transactions that were executed through Hunter Wise. During that period, according to the Order, approximately 39 of Vertical’s customers paid $1,008,583 to Vertical in connection with these precious metals transactions. The Order finds that these customers lost $893,859 of their funds to trading losses, commissions, fees, and other charges by Vertical and other companies, and that Vertical received commissions and fees totaling $554,566 in connection with these precious metals transactions.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, leveraged, margined, or financed transactions, such as those conducted by Vertical, are illegal off-exchange transactions unless they result in actual delivery of the commodity involved within 28 days. The Order finds that metals were never actually delivered in connection with the leveraged, margined, or financed precious metals transactions made on behalf of Vertical’s customers.

The CFTC cautions victims that restitution orders may not result in the recovery of money lost because the wrongdoers may not have sufficient funds or assets. The CFTC will continue to fight vigorously for the protection of customers and to ensure the wrongdoers are held accountable.

CFTC Division of Enforcement staff members responsible for this action are Michelle Bougas, Alan Edelman, Michael Solinsky, and Charles D. Marvine

COURT ORDERS MAN AND HIS COMPANY TO PAY OVER $500,000 FOR OFF-EXCHANGE PRECIOUS METALS TRANSACTIONS

FROM:  U.S. COMMODITY FUTURES TRADING COMMISSION 

Federal Court Orders Florida Resident Lawrence Scott Spain and His Florida Company, Palm Beach Capital LLC, to Pay More than $520,000 in Restitution for Engaging in Illegal, Off-Exchange Precious Metals Transactions

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that on August 4, 2014, Judge Beth Bloom of the U.S. District Court for the Southern District of Florida entered a Consent Order for Permanent Injunction against Florida resident Lawrence Scott Spain and his company, Palm Beach Capital LLC (PBC) (the Defendants), for engaging in illegal, off-exchange precious metals transactions. The Order requires the Defendants, jointly and severally, to pay restitution of $526,960; imposes permanent trading, solicitation and registration bans against them; and prohibits them from engaging in illegal, off-exchange retail commodity transactions, as charged. Spain’s last known address was in Boca Raton, Florida.

The court’s Order stems from a CFTC Complaint filed on May 13, 2014, that charged the Defendants with engaging in illegal, off-exchange transactions in precious metals with retail customers on a leveraged, margined, or financed basis (see CFTC Press Release and Complaint 6931-14). The Complaint further alleged that Spain, as controlling person for PBC, is liable for PBC’s violations of the Commodity Exchange Act.

The Order provides that Melanie Damian, Esq. is responsible for collecting restitution and making any distributions to PBC’s customers. Ms. Damian was appointed by the U.S. District Court for the Southern District of Florida as Special Monitor, Corporate Manager and Equity Receiver in the CFTC’s enforcement action against, among others, Lloyds Commodities, LLC and certain of its associated entities (referred to collectively as Lloyds Commodities) and Hunter Wise Commodities, LLC and certain of its associated entities (referred to collectively as Hunter Wise) (see CFTC Press Releases 6447-12, December 12, 2012 and 6935-14, May 22, 2014). The Order finds that PBC transacted the illegal precious metals transactions through Lloyds Commodities and Hunter Wise.

The Order further finds that, since at least July 16, 2011 and continuing through at least August 2012, PBC, by and through its employees including Spain, solicited retail customers by telephone and on PBC’s website, to engage in off-exchange leveraged, margined, or financed precious metals (including gold, silver, platinum and palladium) transactions. During that period, according to the Order, approximately 39 of PBC’s customers paid at least $1.35 million to PBC in connection with precious metals transactions. The Order finds that these customers lost at least $1.25 million of their funds to trading losses, commissions, fees, and other charges by PBC and other companies, and that PBC received commissions and fees totaling $526,960 in connection with these precious metals transactions.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, leveraged, margined, or financed transactions such as those conducted by PBC, are illegal off-exchange transactions unless they result in actual delivery of the commodity involved within 28 days. The Order finds that metals were never actually delivered in connection with the leveraged, margined, or financed precious metals transactions made on behalf of PBC’s customers.

The CFTC cautions victims that restitution orders may not result in the recovery of money lost because the wrongdoers may not have sufficient funds or assets. The CFTC will continue to fight vigorously for the protection of customers and to ensure the wrongdoers are held accountable.

CFTC Division of Enforcement staff members responsible for this action are R. Stephen Painter, Jr., Michael C. McLaughlin, David W. MacGregor, Lenel Hickson, Jr., and Manal M. Sultan.

CFTC ORDERS NEWBRIDGE METALS TO PAY RESTITUTION FOR ILLEGAL PRECIOU METALS TRANSACTIONS

FROM:  COMMODITY FUTURES TRADING COMMISSION 
CFTC Orders Florida Company Newbridge Metals, LLC to Pay over $1.5 Million in Restitution for Illegal, Off-Exchange Precious Metals Transactions

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today issued an Order filing and simultaneously settling charges against Newbridge Metals, LLC, based in Boca Raton, Florida, for engaging in illegal off-exchange precious metals transactions.

The CFTC Order requires Newbridge to pay restitution of $1,517,930.66 to its customers. In addition, the Order imposes permanent registration and trading bans against Newbridge and requires the firm to cease and desist from violating Section 4(a) of the Commodity Exchange Act, as charged.

As explained in the Order, financed transactions in commodities with retail customers, like those engaged in by Newbridge, must be executed on, or subject to, the rules of an exchange approved by the CFTC.  The CFTC Order finds that, from February 2012 through February 2013, Newbridge solicited retail customers to buy and sell precious metals on a financed basis.

According to the Order, Newbridge telemarketers typically represented that a customer could purchase a desired quantity of precious metals with a 25% deposit, and that the customer could borrow the remaining 75%. The customer would then pay Newbridge a finance charge on the loan, a service charge, and a maximum commission of 15%.

If a customer agreed to the transaction, the customer sent the deposit, finance charge, and commission to Newbridge. Newbridge confirmed the transaction and ultimately transferred the funds to Hunter Wise Commodities, LLC (Hunter Wise), the Order finds.  Hunter Wise subsequently remitted to Newbridge a portion of the customer commissions and fees, with Newbridge ultimately receiving $1,517,930.66 in commissions and fees for the retail financed precious metals transactions executed through Hunter Wise, the Order states.

However, according to the Order, neither Newbridge nor Hunter Wise bought, sold, loaned, stored, or transferred any physical metals for these transactions, and neither company actually delivered any precious metals to any customer.  Because Newbridge’s transactions were executed off exchange, they were illegal.

The CFTC sued Newbridge’s clearing firm, Hunter Wise, in federal court in Florida on December 5, 2012.  The CFTC charged Hunter Wise with engaging in illegal, off-exchange precious metals transactions, as well as fraud and other violations (see CFTC Press Release 6447-12).  On February 25, 2013, the court granted a preliminary injunction against Hunter Wise, froze the firm’s assets, and appointed a corporate monitor to assume control over those assets (see CFTC Press Release 6522-13).